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Agco, Deere ditch profits guidance - but it is CNH shares which tumble

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The ag machinery sector hit turbulence as two of its major participants, Agco and Deere & Co, ditched guidance, while a third, CNH Industrial, revealed the departure of its chief executive – with differing impacts on share prices.

 

Agco said that because of the Covid-19 outbreak, and “the lack of certainty of both the duration and magnitude of its impacts”, it was withdrawing its financial guidance to investors.

 

The group, owner of marques such as Fendt and Massey-Ferguson, said it had “significantly reduced or suspended” production in several factories in its key European market, citing “material shortages and constraints” in its supply chain.

 

“Additional production disruptions in other regions are expected over time,” Agco said.

 

‘Could be material’

The comments came as US-based Deere & Co, which makes John Deere machinery, also withdrew its financial guidance, thanks to the coronavirus outbreak, which it said had prompted temporary shutdowns at some factories, although it pledged to “continue its domestic operations”.

 

Deere, which shut some Chinese capacity in January, also flagged supply chain “challenges” caused by Covid-19, noting too an impact of the disease on labour, as well as on “demand for the company’s products”.

 

“The ultimate magnitude of Covid-19, including the extent of its impact on Deere & Company’s financial and operational results, which could be material, will be determined by the length of time that the pandemic continues,” the group added.

 

Deere had forecast earnings of $2.7bn-3.1bn for its financial year to the end of October.

 

Market reaction

Nonetheless, shares in Deere stood a modest 0.3% down at $111.25 in morning deals in New York despite the statement, outperforming the market, which stood 1.8% down, as measured by the S&P 500 index.

 

The shares had already fallen a little over 30% for 2020, although that remains a little better than the 36% drop in the S&P 500.

 

Agco stock stood 2.1% lower at $39.446 marginally underperforming the index, and taking its losses for 2020 to 50%.

 

Agco had forecast sales of $9.2bn this year, and earnings of $5.00-5.20 per share, although the consensus is currently for a $4.98-per-share figure, according to Refinitiv.

 

CNH shares drop

CNH Industrial shares, by contrast, plunged by 13.2% to E4.898 in afternoon deals in Milan, hitting an all-time low, after it unveiled the departure “with immediate effect” of its chief executive, Hubertus Mühlhäuser, after 18 months in post.

 

Suzanne Heywood, the former senior partner at McKinsey who because the CNH chair in July 2018, was named acting chief executive while the group seeks a replacement for Mr Mühlhäuser.

 

The group - which last month cut to at $0.78-0.86 from $0.95-1.00 its guidance for earnings per share this year - gave no reason for the departure of Mr Mühlhäuser, and indeed said it would continue with a strategic plan devised under his leadership.

 

This includes the spin-off of the group’s commercial vehicles and powertrain businesses.

 

‘Extraordinary times’

Exor, the Agnelli family investment vehicle which is CNH’s biggest shareholder, said that it welcomed Ms Heywood’s appointment “in order to provide the business with the decisive leadership required especially in the current global context.

 

“Extraordinary times require clear and effective leadership of the kind we know Suzanne Heywood will bring to her new role as acting CEO,” said John Elkann, the Exor chairman and chief executive.

 

Lady Heywood is Exor’s managing director.

 

 

* CNH said in a follow-up statement on Tuesday that Mr Mühlhäuser resigned "to pursue other interests.

 

"While Mr. Mühlhäuser offered to assist the Company while it searched for a successor, the board determined that the company had access to appropriate experience and skills and decided therefore to accept his resignation with immediate effect," the announcement added.

 

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